How to Dump Your Fee-Filled 401(k)

401(k) fees are back in the news. These plans still make sense for many workers, especially if there is a company match. But it's tough to make the case for sticking around once you retire or find another job. Here are four ways to treat your 401(k) assets.

With hidden 401(k) fees back in the headlines, financial advisers say that in many cases it just doesn’t pay to leave your money in these plans—especially once you retire or switch employers. Recent findings from Demos, a research group, include this zinger: hidden fees may claim 30% of your savings.

That’s probably overstated. But it raises an interesting question: What are your options as they relate to this important savings account, which may represent the vast majority of your nest egg? For a sense of how hidden fees can zap your savings, check out this calculator.

There’s a lot to consider. For example, if you plan to retire early, leaving your 401(k) alone might be a good idea. These plans typically allow employees who leave work to make penalty-free withdrawals at age 55—four and a half years early. On the other hand, you’ll have greater investment choice and maybe lower costs in an IRA.

In thinking about where to stow your savings, keep in mind that a company match often is the most valuable aspect of a 401(k). If you are getting one, you should probably stay put. But the matching element disappears when you retire or move to another employer. Then, preserving tax-deferred growth becomes your main consideration. According to a report from mutual fund company T. Rowe Price, here’s how to look at your four primary options for 401(k) savings:

Roll over the assets into an IRA This will maintain your tax-advantaged status and allow you to consolidate retirement accounts. You’ll get more investment options and likely fewer hidden fees. In some cases, you may be able to take penalty-free distributions at age 55. You cannot take a loan from your IRA, as you can with a 401(k). You’ll have to choose between a traditional IRA and a Roth IRA. In the first case, you’ll defer taxes until you begin taking distributions. With a Roth, you’ll pay taxes up front but enjoy tax-free growth.

Move assets into your new employer’s plan This is relatively simple, and it preserves tax-deferred treatment and the ability to take a loan against your assets. But you won’t get a match on funds you roll over. Meanwhile, you’ll be back in a kind of plan that has been broadly criticized for hidden fees. In general, you’ll be better served if the new 401(k) plan sponsor is a large employer with leverage to keep costs down.

Leave the assets in your former employer’s plan This essentially maintains the status quo, only you’ll no longer be getting a match. But you will be familiar with all the plan’s features and options, which can be important if you don’t like to fuss with details. You may also really like certain investment options that may not be available outside that plan. But there may be a minimum balance requirement to stay put and keeping your nest egg spread out among different employers poses challenges for managing your asset allocation and general record keeping.

Cash out the account This is the worst choice. You’ll lose future tax-deferred growth and will be subject to mandatory 20% withholding on the distribution. You will owe even more tax if the distribution pushes you into a higher tax bracket. You may also be subject to an early-withdrawal penalty equal to 10% if you are under age 59.5. This may be a tempting option if you are strapped. But it should be avoided if at all possible.

Dan Kadlec is a journalist who has written about personal finance for TIME and other outlets for 25 years. He is the author of three books, a leading voice in the global financial literacy movement, and strategic adviser to the National Financial Educators Council.

Kadlec's latest is A New Purpose: Redefining Money, Family, Work,Retirement, and Success